Bank of Korea: "COVID-19 Spreading in US and Europe... Impact on Korean Economy May Increase"

"Financial Support Intermediary Loans Assigned to Regional Headquarters Starting the 9th"

[Asia Economy Reporter Kim Eun-byeol] The Bank of Korea stated on the 12th that the negative impact on the Korean economy could increase as the novel coronavirus infection (COVID-19) spreads to Europe and other regions.

Park Jong-seok, Deputy Governor of the Bank of Korea, said during a Q&A session after the announcement of the Monetary and Credit Policy Report, "The spread of COVID-19 in Europe and the United States is progressing faster than expected," adding, "It affects the global economy and could impact areas such as trade." He explained that as COVID-19 spreads beyond Asia to Europe, the ripple effects could be greater.

Last month, the Bank of Korea kept the base interest rate unchanged and lowered this year's growth forecast from 2.3% to 2.1%. The growth forecast at that time was based on the assumption that COVID-19 would peak in March and then decline.

Lee Sang-hyung, Director of the Monetary Policy Department, also said, "COVID-19 is spreading to other countries including ours, indirectly affecting the domestic real economy and negatively impacting travel, services, and exports," adding, "As it recently spreads to various regions such as Europe, the impact on our economy could intensify, so it is necessary to closely monitor the situation."

In the report released that day, the Bank of Korea pointed out that while the impact of COVID-19 on investment currently appears limited, if the situation prolongs, significant disruptions could occur in both production and investment.

The Bank of Korea also noted in the report that recent real economy growth has slowed, while private credit, centered on corporate loans, is increasing. Although market liquidity is expanding, the positive effects on the real economy have weakened. Therefore, micro-level policy efforts are needed to guide market funds smoothly into productive sectors.

Regarding this, Deputy Governor Park said, "We increased the limit for financial support intermediary loans by 5 trillion won, and since the 9th, 5 trillion won has been allocated to each regional headquarters to start supporting local small and medium-sized enterprises," adding, "Support is being provided to service industries, SMEs, and manufacturing sectors facing difficulties in exports to China." Deputy Governor Park explained, "The specific funds supported by the Bank of Korea will be allocated to banks two months later, but banks have already handled financial loans," describing it as "a micro-level policy effort with targeted support policies that are helpful." He also explained that the Bank of Korea is considering policies that can provide targeted support beyond loan policies.

Although corporate working capital loans have recently increased significantly, it is difficult to say that abnormal signs are detected in corporate credit based on delinquency rates. Director Lee said, however, "Since the ripple effects of COVID-19 are uncertain and expected to be considerable, we plan to closely monitor corporate financing conditions according to business management circumstances and respond accordingly."

Additionally, Lee Ji-ho, Head of the Bank of Korea’s Research General Team, added that although manufacturing production disruptions caused by COVID-19 have recently appeared intermittently, the negative impact arising from domestic disruptions is expected to be limited.

This content was produced with the assistance of AI translation services.